Each year, the Consumer Federation of America, or CFA, releases a report on credit scores. Specifically, this report is an analysis of credit score knowledge and what consumers do and don’t know about the impact of their score, warning signs that could lead to poor scores and more.

The good news is that the CFA’s 6th-annual report on the matter, released earlier this week, indicates that Americans have learned from their past mistakes, notably older Americans who got into trouble during the “great recession”. But the bad news is that the report indicates that consumers still have a long way to go in terms of truly understanding the impact credit scores can have and how wide-ranging this impact is.

Check the Report: What Consumers Don’t Know

The biggest misconception that consumers have when it comes to credit scores is just how significant a low score can be when it comes to purchasing. If a credit score scale goes up to 850, a low scores is usually considered 620 or less. Generally speaking, the lower the credit score, the more difficult an individual will have getting financing for any type of purchase – that is, if they’re even approved for financing at all. Typically, poor scores can add anywhere from five to 20 percent to to the total cost of the loan. The CFA report showed that about only 20 percent of all consumers truly know just how much low credit scores can hurt.

The report found that another big unknown has to do with just who can check your credit score. While most consumers know that credit checks are essential for things like mortgages and auto loans, most don’t know that landlords, would-be employers, insurance agents, cell phone carriers and utility companies can also check your credit score in an effort to determine your “risk” as a consumer.

Other unknowns include:

  • About half of all those surveyed didn’t know that lenders are required to inform consumers of their credit score during the application process, whether they’ve been approved or not.
  • About two out of every five people surveyed believed that age and marital status factor into a credit score. That’s obviously not the case.

Conclusion

The good news about the most recent CFA report is that about 80 percent of those surveyed knew the basics about credit scores and credit reporting. Data showed that many are well aware of the negatives that can greatly impact a credit score (i.e. foreclosures, high credit card balances, bankruptcy, missed payments, etc.). But in the case of credit scores, what you don’t know can greatly hurt you. So while the CFA report does have some positives, there’s still a long way to go in order for consumers to truly understand many of the important aspects of credit.

Paying Off Debt – Is It Going to Fix Your Credit?

The short answer: you should pay all your debts. All those unpaid credit card debts, defaulted installment loans and other issues are pulling down your credit score; paying them off will improve it. But, just paying the debts can’t fix everything.

What paying the debts will do.

When you pay off an old debt, it will show up as “closed” or “paid in full.” This is considered a positive or at least neutral entry. But, any negative entries associated with that account will still show up. So, if you have 10 late or missed payments, they will continue to show up as negative entries and drag down your credit score for as long as the account remains. Depending on what kind of account it is, this can be seven to 10 years.

What really needs to happen to fix your credit score.

While paying the debts is a necessary part of credit repair, finessing the record is what is really needed to see significant jumps. Key Credit Repair can negotiate with creditors on your behalf to remove those debts. When a negative entry disappears, your credit score will make a jump. The exact score improvement is difficult to predict, but we have seen significant improvements in our clients’ scores after helping them get negative entries removed.

Building more good credit.

A credit history where all your mistakes are fixed is also not enough. Creditors want to see you continue to use credit in responsible ways. The way you can show this is by opening new accounts and using them wisely.

Creditors like to see both revolving credit like credit cards and installment loans like auto or personal loans. Open a new credit card account and put a single recurring expense on that account. For instance, you can make that card your autopay option on your gym membership or on Netflix. Then, set up that credit card account to automatically pay the balance each month out of your bank account. This way, you have an effort-free way to show responsible use of revolving credit.

For an installment loan, consider a loan for a new car. Even if you can’t get a good rate at first, these loans are easy to refinance. If you do not currently need a new car, you also have the option of a personal loan to pay off your credit cards. Often, you will find a much better rate than you are getting from your credit card company. Set the loan up to debit your checking account automatically right after you get paid.

By making all of these wise steps, you will see a credit report with more positive entries and a credit score on the rise. In time, you’ll have a score that will make mortgage lenders eager to work with you.

Credit Repair Process – The 3 Ups

The process of getting credit repair can be intimidating. The reports can be confusing. The process of addressing each entry can be hard for people to grasp. And, in some cases, there may be a few entries that someone might find embarrassing. But, it can all be put into perspective by dividing the process into a few simple, discrete steps. We like to call them The Three Ups:

Clean Up

During this phase, negative entries are removed. Each of the three credit bureaus has a dispute process in place. Entries that don’t belong on your credit report can show up in error; research shows that two-thirds of credit reports include some sort of mistake. Errors can include showing debts that were already paid, showing duplicate debts, listing debts that are past the age limitations and listing ones that were never yours to begin with. A creditor must verify a debt within 30 days of the dispute. If they can’t, it’s taken off.

Build Up

A lack of negative entries on your credit report is not enough. You also need to show a history of using credit wisely. Your credit repair company can walk you through this process. You build up new credit by opening new credit cards (using secured cards if necessary) and opening installment loans like car loans. It’s good to show a mix of types of credit when you are building up your score. Be careful about opening too many accounts at once. Each hard inquiry temporarily lowers your score. And, if creditors see too many inquiries at once, they can think you are in financial trouble and trying to get money fast. By picking out the types of new credit accounts that will best suit your needs, you can use them to start building up your credit within weeks.

Pay Up

Nobody likes this part, but, the unpaid debts on your credit report that are deemed valid must be paid. This comes after the clean up process because you’ll know what debts are not going away any other way than paying or letting them age enough to fall off your report. The good news is, you will probably not have to pay the full amount on many, if not most, of the unpaid debts on your account. Collection agencies buy old debts for pennies on the dollar. If they manage to collect half the original debt, they are still making a phenomenal profit. Many experts recommend starting with an offer that is as low as one-quarter the original amount. Also, the offer made should be for “pay for deletion.” If that condition is granted, the collection will disappear from your credit report completely.

Repairing your credit takes time. Sometimes the process can seem tedious. But, the effort that goes into it can pay off in the ability to buy a home and enjoy your part of the American dream.

Credit Repair Process – The 3 “Ups”

The process of getting credit repair can be intimidating. The reports can be confusing. The process of addressing each entry can be hard for people to grasp. And, in some cases, there may be a few entries that someone might find embarrassing. But, it can all be put into perspective by dividing the process into a few simple, discrete steps. We like to call them The Three Ups:

Clean Up

During this phase, negative entries are removed. Each of the three credit bureaus has a dispute process in place. Entries that don’t belong on your credit report can show up in error; research shows that two-thirds of credit reports include some sort of mistake. Errors can include showing debts that were already paid, showing duplicate debts, listing debts that are past the age limitations and listing ones that were never yours to begin with. A creditor must verify a debt within 30 days of the dispute. If they can’t, it’s taken off.

Build Up

A lack of negative entries on your credit report is not enough. You also need to show a history of using credit wisely. Your credit repair company can walk you through this process. You build up new credit by opening new credit cards (using secured cards if necessary) and opening installment loans like car loans. It’s good to show a mix of types of credit when you are building up your score. Be careful about opening too many accounts at once. Each hard inquiry temporarily lowers your score. And, if creditors see too many inquiries at once, they can think you are in financial trouble and trying to get money fast. By picking out the types of new credit accounts that will best suit your needs, you can use them to start building up your credit within weeks.

Pay Up

Nobody likes this part, but, the unpaid debts on your credit report that are deemed valid must be paid. This comes after the clean up process because you’ll know what debts are not going away any other way than paying or letting them age enough to fall off your report. The good news is, you will probably not have to pay the full amount on many, if not most, of the unpaid debts on your account. Collection agencies buy old debts for pennies on the dollar. If they manage to collect half the original debt, they are still making a phenomenal profit. Many experts recommend starting with an offer that is as low as one-quarter the original amount. Also, the offer made should be for “pay for deletion.” If that condition is granted, the collection will disappear from your credit report completely.

Repairing your credit takes time. Sometimes the process can seem tedious. But, the effort that goes into it can pay off in the ability to buy a home and enjoy your part of the American dream.

If you hit a bad shot in the game of golf, you have one of two options moving forward: you can either deal with the poor shot and strive to make a better shot on your next stroke or you can drop a new ball and essentially hit a do-over, or a mulligan. In many cases, the mulligan trumps the former option. 

But unlike golf, there are no mulligans when it comes many things in life – like your credit history. Yes, those with poor credit history – and thereby a poor credit score – often wonder if there’s a way for them to hit the reset switch and essentially start over. Essentially, the closest thing to accomplishing this is bankruptcy, but this method of “starting over” can actually do more harm than good over the short term, as bankruptcy can stay on your credit report for up to 10 years. Can I Start A New Credit Report?

Here’s a look at some common misconceptions that people have when it comes to their credit history and starting over:

Name Changes

One common misconception is that you’ll get a new credit report if you were to change your name. That’s false – in this case, one’s existing credit history is simply transferred and carried over to the person’s new name. A person’s credit report is matched to a specific individual, so any data would simply be carried over in the case of a name change.

Social Security Number Change

It’s very rare that someone is issued a new social security number, legally at least. But just like as in the case with a name change, your credit history would simply be carried over to that new number, should you qualify to receive a new social security number. Unlike what many people may hypothesize, a new SSN doesn’t mean a fresh start on your credit.

Can I Start A New Credit Report?

The best option to improving your credit score, and the closest thing to hitting the reset button on your credit report, is simply to take it more seriously. Come up with a credit repair plan that will pay down high-interest debt, aim to reduce your credit card and debt to under 30 percent of your total credit allotment and always be sure to pay your bills on time. Credit repair takes patience and commitment, but it’s certainly not impossible.

On a side note, be wary of quick fix credit repair scams, which create a new credit report by altering your identity. This is illegal – an example of fraud – and can result in much more bad than good.

As you can see, there are no mulligans when it comes to your credit report. The best way to start fresh is to commit to taking the matter more seriously and work to increase your score to make you a more attractive consumer. There’s no such thing as a credit report do-over, so aim to correct your financial mistakes with smart decisions moving forward.

For additional information, feel free to contact our office at 617-265-7900, or schedule a free consultation below. 

Fix Credit: How Do You Fix Credit Report Errors?

About four out of every five credit reports have errors on them. Most of these are minor inaccuracies, such as incorrect employers, which do not affect your credit score. However, sometimes credit reports will erroneously show debt that you have paid off as currently in default or even include accounts that are not yours. When you FIX CREDIT reports to remove these false marks, you can significantly improve your credit score.

First, Get Your Report

You can get your report for free once a year from AnnualCreditReport.com. Grab reports from all three reporting bureaus. Each bureau gathers information independently, so, you can wind up with different information in different reports.

Scan The Reports for Inconsistencies

Are there accounts showing as open and unpaid that you know you handled? Are there others that you don’t even recognize? Highlight everything that looks like it is incorrect. It can sometimes be difficult to tell which debt is what, as collection agencies will buy bad debts for pennies on the dollar.

However, many accounts that show up as a new debt to another agency could be incorrectly on your report. If, for instance, you had a debt discharged during a bankruptcy, it could have been sold anyway. Creditors often do not inform new agencies that a debt has been settled, and it can take time for the news to spread.

In other cases, you may find that certain debts show up twice. For instance, if your student loans are sold after you’ve removed them from default, make sure that the old accounts show up as being closed. If it still appears that those accounts are open, it can make your debt burden look twice as large as it actually is.

Request Removal of Bogus Accounts

Contact each of these creditors, in writing, to ask them to verify the account. By law, a creditor must verify that an account is valid within 30 days of the request. If they can’t prove that the debt is yours, the credit reporting agencies are required to remove it.

You can also dispute debts directly with the credit reporting agencies. Each has processes online for disputes. This will also give you the opportunity to follow up and make sure that errors are handled.

Keep Up the Maintenance

Request your report at least once a year to make sure that everything is accurate. It can help to tie your annual request to another important date such as your birthday or anniversary so you don’t forget. If you are in the middle of efforts to fix credit ratings so you can buy a house, you may want to look into a subscription account or a free service like CreditKarma so you can check more often.

Getting erroneous bad marks removed from your report can provide an almost instant boost to your credit scores. It’s worth the time and effort to make sure that your credit reports are correct.

Request a FREE credit repair consultation below….